New Zealand’s Geothermal Industry Is Poised for the Future

03/01/2015 | Chris Webb

Geothermal power is New Zealand’s most reliable renewable energy source. The country, which is justifiably proud of its geothermal facilities, faces economic forces familiar to the rest of the developed world. The geothermal industry’s solution: diversify and innovate.

Contact Energy fully commissioned New Zealand’s largest geothermal power plant last year, nudging installed geothermal capacity to a shade over 1 GW. Nearly 80% of the country’s electricity is sourced from renewables, placing it among the highest in the world. New Zealand also is ranked in the top 10 globally by the World Energy Council for achieving the right balance between reliability, sustainability, and affordability.

Though New Zealand aims to be the first nation to go 100% renewable, that accolade may elude it, as Iceland edges ever nearer that coveted target; New Zealand has, nonetheless, progressed rapidly in its bid to achieve domestic energy security. According to government data, in 2013, hydro provided the largest amount of the country’s power (22,815 GWh), gas came in second (8,134 GWh), followed by geothermal (6,053 GWh), coal (2,238 GWh), wind (2,000 GWh), and other thermal and bioenergy providing the remainder (618 GWh).

Why Geothermal?

First commercially tapped by the Kiwis (as New Zealanders are known) in the 1950s, significant underground geothermal resources made the country one of the earliest large-scale users of the technology. It is widely considered to be the most attractive “new” source of energy, as “easy” hydropower sites have been largely exploited, and the country is rigorously pursuing a low-carbon goal. In 2014 geothermal electricity contributed approximately 7,000 GWh to a total of 43,000 GWh, roughly 16% of the total, according to GNS Science.

New Zealand is rich in geothermal resources because of its many volcanic areas (Figure 1), faults, and tectonic features. But as geothermal fluid is much lower in temperature than steam produced by a coal boiler or gas turbine exhaust gas, the conversion efficiency to electricity is much lower—around 15% (see sidebar). For this reason geothermal energy supply produces a relatively low fraction of New Zealand’s electricity—about 15%—though it also provides some district heating.

1. Powerful steam. New Zealand’s North Island has several craters and active volcanoes. The popular Tongariro Alpine Crossing trail brings hikers to a saddle with a view of Emerald Lakes (top) and Red Crater (bottom), where steam can be seen and felt below one’s feet. Courtesy: Gail Reitenbach

From Heat to PowerElectricity generation can only be undertaken commercially in high-temperature (roughly 193C/380F) geothermal fields. The fluid collection and disposal system for these developments is similar to those for heat applications, consisting of:■ Wells with multiple casings, typically drilled to 2 to 3 kilometers deep.

■ Separators and associated water vessels—large pressure vessels that separate the phases through centrifugal action.

■ Pipes of various sizes for taking the steam-water mixture from the wells to the separators, then steam to turbines or heat exchangers, or water to reinjection wells or to other heat exchangers, and condensate to reinjection.

The main New Zealand geothermal power station designs include:

■ Simple back-pressure turbines.

■ Condensing turbines (potentially receiving steam at up to three different pressures).

■ Binary cycle plants—essentially reverse refrigeration cycles taking advantage of the organic Rankine cycle. A more recent innovation uses a working fluid that is a mix of ammonia and water and is known as the Kalina cycle.

Some research is being undertaken in New Zealand on the use of Stirling engines to generate electricity from geothermal energy or waste heat sources, according to Brian R. White of the New Zealand Geothermal Association. White says a number of the high-temperature fields use a hybrid plant consisting of back-pressure turbines discharging at just above atmospheric pressure plus a binary cycle plant to condense the steam. A binary plant may also be used to extract heat from brine.

New Zealand has seen a period of rapid growth in the utilization of geothermal energy over the last decade. The availability of high-temperature, productive geothermal resources has made geothermal plants the lowest cost generation facilities to construct and operate (on an energy unit cost basis) compared to other renewable energy or fossil-fueled options.

The increase in geothermal generation from 2010 to 2014 of some 1,500 GWh is significant, being greater than a 20% per year increase over the four-year period. The current total of over 1,000 MWe geothermal capacity typically contributes about 16% of total generation today, now that the Te Mihi plant is fully online (an increase from 13% in 2010). New Zealand today produces almost 80% of its electricity from renewable energy and is strategically targeting 90% by 2025, a figure that analysts, among them, PricewaterhouseCoopers’ Chris Taylor, believe is comfortably achievable. “It’s just a question of when the market is ready for the new capacity,” he says.

Major Players and Plants

State-owned Mighty River Power (MRP), Contact Energy, and Maori Trusts have been the key entities in the geothermal development space over the past 10 years. Both Contact Energy and MRP have had billion dollar geothermal investment programs in the last decade, and total geothermal expenditure topped NZ$2.4 billion (US$1.75 billion).

Nga Awa Purua. The 140-MW Nga Awa Purua Geothermal Power Station (Figure 2), a joint venture between MRP and the Tauhara North No. 2 Trust, was completed in 2010. The plant was constructed by Sumitomo Corp. in partnership with Fuji Electric, the main suppliers, and Hawkins Construction.

2. World record holder. The 140-MW Nga Awa Purua Power Station near Taupo, New Zealand, boasts the largest single-shaft geothermal steam turbine in the world. Courtesy: Kevin McLoughlin, CEO, Credit Ringa Matau

Beca geotechnical engineers, as subcontractors to Hawkins, confronted difficult construction conditions. The company notes that “Weak volcanic soils, aggressive groundwater and high temperatures, and susceptibility to liquefaction” required 30-meter-deep bored piles to support plant structures, including the turbine hall; the generator and turbine weighed a combined 325 metric tons.

A Fuji Electric technical paper explains that the steam turbine for Nga Awa Purua is a “triple-pressure inlet, single-casing, single-shaft, double-flow HP, IP and LP sections, bottom exhaust, and its nominal output is 139 MW. Both steam turbines utilize 31.4-inch-long last-stage blades, which are the largest in any geothermal application.” That made it possible to build what the company says is the largest single-casing geothermal power station utilizing multi-flash cycle technology.

Te Mihi. In 2014, Contact Energy, which supplies 22% of the country’s power, completed the 166-MW Te Mihi Power Station (Figure 3) in the Wairakei steam field north of Taupo. (It was the 2013 POWER Marmaduke Award winner; see the August issue at powermag.com for technical details.) The NZ$623 million plant forms part of a larger local investment, which includes a bioreactor and new wells, making Wairakei the seventh-largest geothermal field in the world.

3. Steamer. New Zealand’s 166-MW Te Mihi Power Station was the 2013 POWER Marmaduke Award winner. Courtesy: Steve Boniface and Contact Energy

Contact CEO Dennis Barnes says, “With two 83-MW steam turbines, the plant has been designed to make the best use of steam and maximise capacity. A vast network of pipes connects Te Mihi to the Wairakei steam field, increasing overall efficiency and generation reliability.”

Te Mihi consists of two Toshiba mixed-pressure units and began generating in 2013. It is located near the center of the current Wairakei production field, at high elevation (about 400 meters above sea level), which assists reinjection, gas dispersion, and cooling tower performance.

Originally conceived as a three-unit replacement for the elderly Wairakei plant, Te Mihi was built as a two-unit plant with space for a future third unit. Steam that was originally conceived for use in the third Te Mihi unit is supplied to Wairakei, which remains in service, albeit operating at a lower than previous load. This development strategy has met the required environmental performance improvements at lower cost than full replacement and offers a future potential path for renewal.

The original Wairakei power station began operation in 1958, so some key parts of the plant are more than 50 years old. Increasing maintenance and refurbishment requirements, and the expectation that continued operation using river water for cooling will not be possible, suggest that it is nearing the end of its useful life and is unlikely to run beyond 2026, when its current suite of resource consents expire, according to Barnes.

Yet, the Wairakei steam field as a whole is predicted to be able to supply steam for electricity generation for many more decades. To enhance the use of this renewable energy resource, Contact developed Te Mihi.

Te Mihi added 574 GWh per year compared to Wairakei. Other benefits include higher efficiency due to lower steam transmission losses, superior location, better energy utilization using dual-flash technology, and significant reduction—over time—in cooling water discharges into the Waikato River.

Ngatamariki. The 82-MW Ngatamariki Power Station, less than two years old, is the world’s largest single-site binary geothermal power plant (Figure 4). The plant, built under a NZ$142 million supply and engineering, procurement, and construction contract by Ormat Technologies, features Ormat energy converters that are directly fed by a high-temperature (193C/380F) geothermal fluid. Previously, only steam turbines or geothermal combined cycle plants had been used.

4. Record holder. The 82-MW Ngatamariki Power Station, less than two years old, is the world’s largest single-site binary geothermal power plant. Courtesy: Mighty River Power

In the case of Ngatamariki, 100% of the exploited geothermal fluid is reinjected, resulting in zero water consumption and low emissions, minimizing the impact on the environment and with no depletion of the underground reservoir.

Former MRP chief executive Doug Heffernan said the plant near Taupo was completed within the cost forecast detailed in the company’s prospectus and had proven performance above design specifications in testing.

Then the largest of its type in the world, Ngatamariki was, he said, “a milestone, and with power output now expected to be 3 MW (4%) higher than spec, shows what can be done with such technology.”

Market Slowdown

The euphoria over Te Mihi and Ngatamariki was short-lived. The two plants were welcomed by the energy market, with the baseload generation they provided helping to smooth out supply from more volatile renewable power sources such as wind. But flat demand for electricity means power companies have put further plans on hold.

In early 2007, when Contact announced plans to invest up to NZ$1 billion in the construction of two new geothermal power stations in the Taupo region—one at Te Mihi and another at Tauhara—demand for electricity was growing strongly at around 2% per year, and New Zealand needed large amounts of new capacity to power its growing economy. At the same time, concern about the impact of climate change and the need to reduce the level of greenhouse gas emissions meant it was important that as much new electricity generation as possible derived from renewable sources.

But the slowdown in load growth has affected generators across the board. Brian R. White, executive officer at the New Zealand Geothermal Association (NZGA), says, “I think it will be quiet in New Zealand for a while in terms of a wide range of geothermal generation. My view is that in the immediate future new geothermal generation will come from the line [distribution] companies who can see niche opportunities and don’t need to build 100-MW plants.”

Another company to apply the brakes to new development is MRP, which just 15 months ago marked the completion and handover of the Ngatamariki power station, expanding the company’s geothermal production to more than 40% of its total generation.

A year ago, Top Energy announced plans to lodge a resource consent application in 2015 for additional Ormat binary power stations, very similar to the units currently at Ngawha. The Ngawha field is the only high-temperature geothermal resource in New Zealand outside the Taupo Volcanic Zone and is thought to be between 20 and 40 square kilometers in area. The springs at Ngawha village are among the very few external signs of the huge natural boiler buried deep below.

It was anticipated that these could start generating electricity as early as 2020. “We’ve been conducting scientific research and modelling… to understand how much geothermal resource might be available,” Top Energy chief executive Russell Shaw says. “Although we won’t know exactly what we have until we explore through test drilling, we believe there could be enough resource for an additional 100 MW of energy.”

The original Ngawha geothermal power station opened in 1998 with a capacity of about 8 MW. An expansion was completed in 2008, increasing it to 25 MW. The Ngawha Power Station was the first power station to come into operation via a resource consent applied for and issued under the Resource Management Act. It is owned and operated by Top Energy and uses a binary cycle manufactured by Ormat Industries. Plant Manager Ray Robinson says the Ngawha plant had “a complex resource consent. It’s subject to continual audit by the Northland Regional Council and also to peer review by an independent panel of environmental experts.” Such considerations add a further dimension to developing geothermal power in New Zealand.

Many ambitious plans are currently on hold. Drilling and exploratory work scheduled for 2014 has been pushed back as part of a series of cost-cutting measures Top Energy has had to implement as a result of a softening New Zealand electricity market and a corresponding drop in projected revenues from Ngawha. There are still plans, however, to apply for its first resource consent with a view to expanding the existing 25-MW station by 50 MW in two stages.

Economic Conditions Prompt Developers to Look Abroad

Since 2013 the hiatus in construction of geothermal capacity due to flat demand growth has prompted developers to shift their focus. New Zealand geothermal operators are concentrating instead on sustaining and maintaining existing developments, looking to share experience by partnering in international developments, and investigating some new prospects.

Greg Bignall, coauthor of a paper to be presented at the upcoming World Geothermal Congress in Melbourne, Australia, and senior scientist at GNS Science, says several New Zealand companies have invested significantly in large-scale industrial direct geothermal energy applications in the past five years. They include Ngati Tuwharetoa Geothermal Assets Ltd. supplying the Svenska Cellulosa Aktiebolaget tissue mill at Kawerau and Tuaropaki supplying clean steam generated from geothermal energy to the Miraka milk powder processing plant at Mokai.

Despite these new developments, there has been a reduction in geothermal direct use overall since 2010, primarily a consequence of Norske Skog Tasman closing one of the paper production lines at its Kawerau facility in January 2013. “There is more that needs to be done in New Zealand to further foster direct geothermal heat use, and the uptake of geothermal heat pumps,” Bignall says.

Developers also are responding to the downturn by setting their sights offshore. MRP for example, is now applying its geothermal expertise in Chile and in the U.S. through EnergySource.

Geothermal Investment and Cost Trends

A steep increase in geothermal investment that took place in New Zealand about 10 years ago looked set to continue and was sustained until the middle of 2014. On the whole, investment in the past five years has been similar to the previous five years but has shifted from the state-owned MRP to the publicly listed Contact Energy, although both companies and a range of others have been active throughout the period.

There has also been significant investment in large industrial direct heat projects in the past five years, as well as in geothermal heat pumps and smaller direct heat applications, but data on such uses is difficult to obtain.

Another indication of investment activity is well drilling, with well costs being a substantial, and growing, proportion of total project costs, whether for electricity generation or heat supply. There is a startling contrast between efforts in earlier decades—when drilling, exploration, and development were controlled by the New Zealand government—and the past decade, during which these efforts have been driven by market conditions and a combination of public and private investment. Recent drilling efforts have exceeded those of former years in both number of wells drilled and diversity of fields in which drilling has been undertaken. Recent wells are generally deeper and larger in diameter than early wells, and so are more costly.

There have been reports of significant drilling cost increases outrunning inflation, but rising costs are also said to be attributable to changes in well design and construction methods. Basically, investment has been enabled on fields that were previously investigated by the New Zealand government, and the heritage exploration data has facilitated additional investigation activities, leading in some cases to further drilling and field development.

Each project will have its own peculiarities with respect to concept and cost, the costs being highly dependent on the nature of the reservoir (especially temperature and productivity of wells). The scale of development has less effect on the cost/MW installed. Given that most future developments will be of a larger scale, typical investment will be on the order of NZ$4/MW installed. With approximately 1,000 MW of viable, consentable generation, this indicates upcoming investment of the order of NZ$4 billion. ■

— Chris Webb (www.bluegnumediasolutions.com) is a freelance energy journalist based in Auckland, New Zealand.

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